From Minimum to Livable: The Case for Embracing Living Wages
As the aftermath of COVID-19 brings rates of inflation to record highs, the struggle to make ends meet in the United States has become more challenging than ever. While consumer prices surge, wages often fail to keep up with cost of living demands. Minimum wage increases have been consistent with an inflation rate of approximately 4.5%, even when actual rates of inflation have seen peaks of more than 9% within the past year. The burden created by the difference between wages and the cost of living bears the heaviest on low-income households, driving many individuals to experience the high rates of unemployment, poverty, homelessness, and negative health outcomes. This current reality signals an urgent need for change, one that can be brought to light by a living wage.
Difference between a minimum wage and a living wage
There are important differences between a minimum wage and a living wage. The first federal minimum wage was enacted in 1938 in an attempt to stabilize the post-depression economy and create a minimum standard of living for employees. In turn, a minimum wage is just that: the minimum amount of money that an employer is required to pay their employees.
However, both federal and state minimum wages often fall short of providing a livable income above the poverty line. Outdated statistics in legislative calculations on minimum wage, the high variability of living costs by county, intense fluctuation of rent prices, and other factors contribute to an insufficient system. The current minimum wage is ineffective in keeping up with increasing costs of living, which commonly leads to a continuation of the cycle of poverty.
A living wage represents more than just survival; it envisions an income level that allows households and individuals to achieve a decent standard of living. Essential necessities such as food, housing, education, healthcare, transportation, and emergency provisions are factored into the calculation of a living wage. More simply, a living wage is the amount of money necessary to support a household without falling below the federal poverty line.
MIT has developed a Living Wage Calculator to help calculate the local wage rate required for a full-time worker to cover costs of basic needs. The calculator breaks out cost of living by state, county, and metro areas and factors in costs such as food, housing, broadband, childcare, and other basic necessities.
While there is no federal mandate for living wages, individual companies have the power to make a profound impact by voluntarily adopting them for their employees. Living wages go far beyond mere financial compensation; they promote employee well-being, reduce financial stress, and foster a more engaged and productive workforce. Offering a living wage can help be a true catalyst for change, breaking the cycle of poverty and inspiring movement towards a fairer future.
Benefits of a Living Wage
A living wage can have positive effects for those experiencing poverty. By providing workers with a wage that adequately meets their basic needs, we can alleviate the burden of juggling multiple jobs and the weight of insurmountable debt. This shift can empower workers and has the potential to open doors to new opportunities.
Embracing a living wage is not just a social imperative; it also fuels economic growth. As individuals earn more, their purchasing power increases, igniting a chain reaction of increased consumer demand. This surge in demand, in turn, stimulates economic growth, creating a more prosperous environment for businesses and communities. Additionally, with a more stimulated economy, there would be an increased tax base which would provide more money for investment in infrastructure and services that benefit whole communities.
Arguments against raising worker wages often cite concerns of increased costs for businesses, potential job losses, and higher consumer prices. However, research has debunked these claims, revealing them to be inaccurate and methodologically unsound. There has been little national conversation on government action to adopt a living wage, with the focus remaining on the federal minimum wage. Evenstill, raising the minimum wage is unlikely to fully address the diverse needs of workers across states, metropolitan areas, and counties. A living wage takes a more localized approach, ensuring compensation is tailored to meet the unique cost of living in different regions, providing a more equitable solution for all and acknowledging greater questions like what it means to ‘make enough’ and who ultimately decides on where to draw those lines.
Living wage in ESG
The concept of a living wage is becoming more prevalent in ESG initiatives and, as companies worldwide reevaluate their impact on society and the environment, the case for adopting living wages throughout supply chains becomes a compelling imperative. Even some of the larger ESG reporting initiatives like the UN Global Compact point out the intersection between ‘decent work’ (a right protected by the UN Declaration of Human Rights) and earning a living wage. The growing global discourse on living wages highlights its urgency and presents a compelling business case. Research shows that living wages may decrease turnover and absenteeism, reduce training costs, and improve employee output in terms of productivity and quality. Companies can mitigate risk as well as reap the benefits by implementing living wages in their supply chains, which can potentially improve supply chain resilience and trading relationships.
Committing to a living wage
The space for businesses to engage with living wages is still evolving. Recent research conducted by the World Benchmarking Alliance reveals that only a mere 4% of surveyed companies currently disclose their commitment to paying workers a living wage or have plans to do so. To bridge this gap, businesses have the opportunity to join coalitions such as the Global Living Wage Coalition, Collective Impact Coalition, and B Corp Certifications.
As a part of the 'S' in ESG (Environmental, Social, and Governance), living wages align seamlessly with human rights due diligence plans, empowering businesses to demonstrate their dedication to fair labor practices and sustainable growth.
Need help on where to start? Uplift can help.
The Uplift Agency
Uplift builds strategies, programs, and communication campaigns that advance ESG in workplaces, supply chains and communities.
We know how to navigate the road ahead because we’ve already been down it – 90 percent of our team has led environmental or social programs in corporations or nonprofits. Because ESG is all we do, our services are more comprehensive and integrated than most firms.
